China’s growth accelerated more than expected in the third quarter, boosting the odds of the economy reaching Beijing’s annual target and dimming the prospects for additional easing measures.
Gross domestic product grew 4.5 per cent from a year ago after a gain of 4.3 per cent in the second quarter, according to data released by the National Bureau of Statistics on Monday, compared with the median forecast of 4.4 per cent by economists surveyed by Bloomberg. That took expansion in the first nine months of the year to 4.6 per cent — within the government’s annual goal of 4.5 per cent-5 per cent.
“Bigger fiscal spending helped both fixed asset investment and retail sales,” said Xing Zhaopeng, senior China strategist at Australia and New Zealand Banking Group Ltd. “The recovery remains unsolid because the fiscal outlook is not stable. The question will be how much fiscal expansion can do in the future. We still see a downside risk to 2027.”
The improvement in the economy should give policymakers some breathing room, allowing them to hold off on further easing as they remain constrained by thin bank margins and persistent fiscal strain on local governments.
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Industrial production growth accelerated to 5.5 per cent on year in September, matching forecasts. Fixed-asset investment shrank 7.2 per cent in the first nine months of the year, unchanged from its drop in January-August.
Retail sales picked up far more than expected to 1.1 per cent, versus a 0.4 per cent rise in August. Excluding car purchases, retail sales grew 3.9 per cent from a year ago, the fastest pace since October 2025.
The yield on the government’s 10-year bonds climbed one basis point to 1.65 per cent after the data release. The yuan held on to its earlier gain, rising 0.1 per cent to 6.6829 per dollar in offshore trading.
China’s currency has advanced over 4 per cent against the dollar since the start of the year to outperform most of its Asian peers, thanks to rising exports and the central bank’s tolerance for a stronger exchange rate.
Even as the slowdown intensified in recent months, officials initially focused on implementing existing pro-growth policies, before dialing up their support three weeks ago with a package of fresh targeted measures.
Growth in the world’s second-largest economy has been marked by a divide between booming exports — stoked by a global investment supercycle in artificial intelligence — and sluggish household spending, with investment stuck in a long slump. The job market has also softened while a years-long property downturn drags on.
Property investment plunged 20.6 per cent in the first nine months, a deterioration from a drop of 19.9 per cent in January-August. The surveyed urban jobless rate unexpectedly improved to 5.2 per cent in September from 5.3 per cent in the prior month.
Frail domestic demand has left China increasingly dependent on exports for growth. And that’s put Beijing under rising pressure from trade partners to address its yawning surplus, which is on pace to hit a new high this year in excess of the $1.2 trillion recorded in 2025.
The European Union is preparing to create new powers that could allow it to shut off China’s access to its single market as part of a dramatic new push to rebalance bilateral trade.
Meanwhile, foreign leaders have called on Beijing to allow for more appreciation in the Chinese currency, which they say is undervalued and gives the nation’s exporters an unfair competitive advantage. The International Monetary Fund estimates the yuan’s undervaluation in the range of 17.3 per cent to 25.3 per cent in 2026, with a midpoint of 21.3 per cent.
“Overall, the latest data suggest growth momentum improved toward the end of the third quarter,” said Zhou Hao, chief economist at Guotai Junan. “While the property downturn and soft domestic demand remain challenging, stronger-than-expected GDP and retail sales figures, firmer manufacturing activity, and an improving labor market point to a more constructive outlook for this quarter.” - Bloomberg
